The road ahead for Microsoft

  • John Fontana (Network World (US online))
  • 09 October, 2006 14:11

An image of Microsoft's future - delivering software-as-a-service to corporate customers - is finally starting to develop. That picture, while not ready to be hung on a wall, is being brought into focus by Microsoft's development of Windows Live consumer services; Office Live, which is targeted at small and midsize businesses (SMB); search technologies that meld locally stored and Internet-based data; and the recently introduced Dynamics CRM Live enterprise application service set to debut in 2007.

When they ship, the company plans to paint Vista and Office 2007 into the portrait, integrating Office SharePoint Server 2007 and Windows Vista with desktop and online search technologies, for example. Beyond that, Microsoft is heavy on the strategy and vision.

"Today, Microsoft is doing a lot of marketing, and customers are certainly looking over their shoulders to see when it realistically will enter the [software-as-a-service] market," Nucleus Research vice-president of research, Rebecca Wetteman, said. "Microsoft is a little behind the ball in the on-demand space. Having some hosted applications is not necessarily going to cut it."

R&D boost

For now, Microsoft plans to use its platform of applications and infrastructure software to enter into the world of services, and the company has earmarked an additional $US500 million in its fiscal 2007 budget for R&D on Internet-based services, including software and advertising-based services like those made popular by Google.

"By embracing services in most everything we do, the potential for this company to positively impact ... the operation of business has never been greater," chief software architect, Ray Ozzie, said.

Ozzie is leading the charge toward what he calls the services transformation, a change fostered by powerful edge devices and centralised services - and high-bandwidth pipes to connect the two.

That transformation includes going toe to toe with Google, Yahoo and others to provide consumer and corporate online services, but Ozzie said those are only a start of a stepwise process that will see first SMBs, then large corporations adopting Internet-based services. This will be defined by integrating desktop-based software and server applications with online services anchored by Windows Live, according to Ozzie. Users would access those services through browsers, mobile devices or rich clients, where local applications and data are augmented by one or multiple services.

Critics have said Microsoft has to surmount challenges before it can make that vision a reality. These include integrating its portfolio of corporate software into its services model, explaining differences between hosted and on-demand versions of software, avoiding a cannibalisation of its vast partner community and outsmarting a growing collection of vendors offering online alternatives.

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Where are the roots?

"Some may view what we're doing here as a big, bold bet," Ozzie said. "But frankly, it's very natural for us as a platform company. Our current offerings represent a huge asset that we can migrate to our advantage into this new services world."

Experts believe he will have to change a corporate culture that historically divided up internal product development.

"He has a lot of cleaning up before school starts," Nucleus Research's Wetteman said. "There are different product teams and strategies that he needs to refocus."

The first example is Dynamics CRM Live, which is Microsoft's answer to and other providers of line-of-business applications in the software-as-a-service model. The company plans to ship its CRM software, code-named Titan, next year. Titan will be available in three versions based on the same code, which will be tuned to run on-premises within a customer's network, to be hosted by a third party or obtained as a Live service from the Internet. The code also has been updated to add multi-tenant capabilities, letting multiple users reside on a single server.

This delivery model maps to the future laid out by Ozzie where services are additive.

For example, the on-premise version of Titan will integrate with features of Vista and Office 2007, but users also will be able to integrate with Windows Live services. Developers will be able to overlay Live Local maps with customer data within Outlook, a mash-up integrating Internet-based services, corporate applications and rich-client software on the desktop.

Director of platform strategy for Microsoft, Tim O'Brien, admitted the services model for other Dynamics software, such as ERP, is not baked sufficiently to talk about publicly.

Microsoft has conceded this kind of services model would require corporate users to weigh the trade-offs - cost versus control, for example - but said the shift toward tapping into a services infrastructure maintained by a third party could offer cost advantages that can't be ignored.

Will it fly?

Whether large organisations will shift resources to the services model is still a wide-open question, but the scales seem to be tipping in favour of it. A recent IDC survey of 512 North America-based IT professionals showed nearly 79 per cent have purchased or are reviewing software-as-a-service offerings. And Microsoft is proving there is some interest among smaller companies.

Its Office Live service, which launched on February 15 with free beta trials, already has 110,000 users, according to Ipwalk, which provides domain- and name-server data and statistics.

The basic Office Live service provides a domain name, hosting, a home page and five email accounts, and will be offered free. But the cost question won't be answered until later this year when Live Collaboration and Live Essentials are released. These add-ons provide collaboration and project management tools, among other services.

Whether Office Live's fee-based services fly will help determine to what extent Microsoft is a player. But make no mistake, the company is attacking the problem from all angles and from the bottom of the organisation to the top.